Buying an Annuity - Level or increasing- which?

MikeJones_2

Hi EdInvestor,

I agree with your statements and that's why I specifically pointed to the Thoresen Review document and FSA Website explanations of Regulated Advice.

I fully understand the implication of advice and regulated advice as that is, in part, the nature of my day job (and separately as a TPAS adviser where we try to pick up the pieces of other peoples' financial mistakes).

I trust you understand my sentiment though, and why I chose to express it (i.e. it's worth reminding viewers from time to time).

Mike Jones

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser.

EdInvestor

Dithering_Dad wrote: »

I had the same discussion many times, especially regarding EdInvestor's complete prejudice against pensions (don't get one no matter what your circumstances are because ISAs are best) and Endowments (sell them all, no matter what your circumstances are because they're all dogs).

Neither of these statements is true. See this recent example.But history tells us there's no point in debating with DD on these issues,unfortunately.

bigbloke45

It occurred to me that there may be one good reason for opting for an increasing/indexed linked annuity.

If by taking such an annuity, you reduce your income to a level where you can reclaim council tax, get tax credits etc, then could the benefits make up the difference? You could then look forward to an increasing pension, safe in the knowledge that the state will pay you for the privilege. Also as such benefits are index linked, you would always benefit.

This is just an idea and I'm sure you guys out there will shoot it down. Also could you be accused of artificially reducing your income in order to qualify for state benefits?

MikeJones_2

Hi bigbloke45,

bigbloke45 wrote: »

It occurred to me that there may be one good reason for opting for an increasing/indexed linked annuity.

If by taking such an annuity, you reduce your income to a level where you can reclaim council tax, get tax credits etc, then could the benefits make up the difference? You could then look forward to an increasing pension, safe in the knowledge that the state will pay you for the privilege. Also as such benefits are index linked, you would always benefit.

This is just an idea and I'm sure you guys out there will shoot it down. Also could you be accused of artificially reducing your income in order to qualify for state benefits?

You're spot on with this example although your comment 'you'd always benefit' might not work for the entire life of the person concerned (i.e. there is a risk of a change of legislation, for instance).

Your suggestion is indeed one example of when an increasing annuity would be worthy of consideration. It reitreates the need to assess everyone's circumstances individually.

Mike Jones

I work in the field of Pension Education and Pension Guidance in the UK. I am a current member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser.